Wage Garnishment? We Explain: What is a Wage Garnishment?

If you have experienced having a garnishment placed on your wages you know that it is no fun at all. If you are being threatened with a wage garnishment it is important to act quickly. A wage garnishment can cause financial hardship and considerable embarrassment.  

What is a wage garnishment? A wage garnishment occurs when you default on your debt and your creditor obtains a judgement against you in court. A wage garnishment in Small Claims Court can involve seizing up to 20% of your earnings. When a tax debt is owed to the Canada Revenue Agency they do not need a court order to garnish (seize) your wages because they have the authority to do so under the Canadian Income Tax Act. The Canada Revenue Agency can garnish up to 50% of your primary employment earnings and up to 100% of other earnings, such as pension income.

When a wage garnishment occurs, your employer will be sent a notice to re-direct a percentage of your income. In the case of a wage garnishment issued through Small Claims Court, your employer will direct the earnings to Small Claims Court where it will be held for a period of time, then sent to your creditor. In the case of the Canada Revenue Agency, the funds will be sent directly to The Canada Revenue Agency.

Wage garnishments can not only be embarrassing, but can impact your employment, since your employer is notified and has to ensure that he deducts the money requested from your wages and remits it. This creates an administrative burden, especially in the case of Small Claims Court. If your employer does not garnish your wages as directed by the court, your creditor can ask for a garnishee hearing at the court and the court has the authority to order your employer to pay the amount of your judgement. A wage garnishment issued to your employer alerts your employer to the fact that you have a financial problem. If you hold a position where you must be financially responsible, for example, within the finance industry or a regulated industry that requires a clear financial history, it can create an issue.

If you are self-employed and a wage garnishment is issued by the Canada Revenue Agency, they can send notice to your clients to direct the proceeds of your invoices to them. While it may be more difficult for an employer to use the wage garnishment as cause to dismiss you, it is very common for companies not to want to deal with suppliers who appear to have financial problems.

Financial hardship is one of the major consequences of a wage garnishment. Losing a large percentage of your earnings may result in it becoming difficult to pay the basic necessities of life, such as shelter, food or transportation.

If you have been notified that your wages are going to be garnished, or your wages are being garnished, you don’t have to suffer. There are financial programs available that provide an effective means to stop a wage garnishment. The worst thing you can do if you owe money on a defaulted debt is ignore it. The faster you face the financial problem, the faster you can get back onto a firm financial footing. It can feel confusing and overwhelming when something as serious as a wage garnishment presents itself, but there are financial professionals who specialize in helping people sort out their financial problems.

For more information about wage garnishments, or if you need help to deal with a wage garnishment, please call DebtCare Canada 416-907-2582 or visit www.debtcare.ca.